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PRODID:-//Indira Gandhi Institute of Development Research - ECPv4.1.2//NONSGML v1.0//EN
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X-WR-CALNAME:Indira Gandhi Institute of Development Research
X-ORIGINAL-URL:http://www.igidr.ac.in
X-WR-CALDESC:Events for Indira Gandhi Institute of Development Research
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DTSTART;TZID=Asia/Kolkata:20250402T161500
DTEND;TZID=Asia/Kolkata:20250402T173000
DTSTAMP:20260425T044408
CREATED:20250401T091923
LAST-MODIFIED:20250401T092704
UID:19666-1743610500-1743615000@www.igidr.ac.in
SUMMARY:IGIDR Seminar: "Ignoring The Left Tail"  by Dr. Kaushalendra Kishore (CAFRAL)
DESCRIPTION: \nAbstract:-\nThis article studies a principal-agent problem with flexible information acquisition. The agent has to choose between investing in an innovative asset about which costly information can be acquired or in a conventional asset about which there is enough historical data and no information is acquired. In the first-best problem\, the principal acquires information about the entire distribution of cash flow from the innovative asset. Contrarily\, in the second-best problem\, less information is acquired about the left tail of the distribution compared to the first-best. The optimal contract of the agent when the innovative asset is chosen pays zero wage below a cutoff value of cash flow and an increasing wage above the cutoff. As a consequence\, the information intensity is zero for these low cash flows where no wage is paid. This results in investment in even those assets that have a thick left tail and thus a high likelihood of failure ex post. Our paper explains why agents make investments without learning about the left tail of the distribution which in turn may lead to a financial crisis. 
URL:http://www.igidr.ac.in/seminars/igidr-seminar-ignoring-left-tail-dr-kaushalendra-kishore-cafral/
CATEGORIES:Upcoming events
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